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Book part
Publication date: 10 November 2020

Mark Schaub and Garland Simmons

American depository receipts (ADRs) listed on the New York Stock Exchange during the 1990s and 2000s are compared to determine how well they performed versus the US index and…

Abstract

American depository receipts (ADRs) listed on the New York Stock Exchange during the 1990s and 2000s are compared to determine how well they performed versus the US index and respective regional indexes utilizing three-year holding period excess returns. Results suggest that ADRs listed in the 2000s perform better than those in the 1990s. Also, seasoned equity offerings performed better than initial public offerings. Regression analysis indicated the best predictors of ADR performance are the returns of the respective regional index where the ADR-listing firm is headquartered, the date of issue (2000s vs 1990s), and whether the ADR was from an emerging economy.

Details

Financial Issues in Emerging Economies: Special Issue Including Selected Papers from II International Conference on Economics and Finance, 2019, Bengaluru, India
Type: Book
ISBN: 978-1-83867-960-6

Keywords

Article
Publication date: 1 May 2006

Mark Schaub and S.P. Uma Rao

This study examines the initial two‐week excess performance relative to the S&P 500 Index of American Depository Receipts (ADRs) listed on the New York Stock Exchange from January…

696

Abstract

Purpose

This study examines the initial two‐week excess performance relative to the S&P 500 Index of American Depository Receipts (ADRs) listed on the New York Stock Exchange from January 1987 to September 2001 to determine whether short‐term wealth effects exist.

Design/methodology/approach

Standard intial public offering methodology is used to test for significant excess performance.

Findings

Results for the entire sample of 281 ADRs suggest the initial excess performance was not significant. However, after segmenting the sample, emerging market ADRs significantly outperformed the S&P 500 by over three per cent while developed market ADRs underperformed by 0.92 per cent. Also, Latin American ADRs outperformed the market index by nearly five per cent during the first two weeks after issue while European ADRs underperformed the market by nearly one per cent. Asia Pacific ADRs underperformed the S&P 500, but not significantly in the early trading.

Research limitations/implications

The findings suggest emerging market ADRs, particularly those from the Latin American region, perform well in the early trading while developed market ADRs do not. Future research may identify variables that affect or explain ADR excess returns.

Originality/value

The paper provides insights into the types of ADRs that accumulate wealth in the short term investment horizon.

Details

Managerial Finance, vol. 32 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Book part
Publication date: 11 December 2006

Mark Schaub and Bruce L. McManis

We utilize cross-sectional regression analysis to identify key variables affecting the initial three-year holding period returns of foreign equities traded as American Depository

Abstract

We utilize cross-sectional regression analysis to identify key variables affecting the initial three-year holding period returns of foreign equities traded as American Depository Receipts (ADRs) on the New York Stock Exchange (NYSE). Our results suggest that U.S. market index movements and foreign exchange rates are the main determinants of the initial three-year holding period returns for 285 ADRs listed from January 1990 through December 2002. The determinants vary once the sample is broken into subsets comparing ADRs issued before 1998 to those issued afterwards, ADRs issued as IPOs versus SEOs, and Asia Pacific ADRs versus European and Latin American ADRs. We also find that U.S. interest rate movements and type of ADR issue (IPO versus SEO) provide little explanatory power for ADR returns overall.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-441-6

Article
Publication date: 1 January 2006

DeQing Diane Li and Kenneth Yung

Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information induced…

1010

Abstract

Purpose

Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information induced stock return autocorrelation is still very limited. The difficulty in obtaining foreign country information by small investors makes the private information of institutional investors in the ADR (American Depository Receipt) market more significant and influential. As such, the ADR market provides a favorable environment for testing the effect of private information on return autocorrelation. The purpose of this paper is to address this issue.

Design/methodology/approach

In this paper, ADRs are sorted annually into three groups based on market equity capitalization. Within each capitalization group, ADRs are further sorted into three groups based on the fraction of shares held by institutional investors. Each ADR is assigned to one of the nine groups and group membership is rebalanced each year. The return autocorrelation of individual ADR securities and ADR portfolios for each group are then calculated.

Findings

The results demonstrate that ADR individual stock and portfolio daily return autocorrelations are positively related to institutional ownership. It is also found that other explanations, such as non‐synchronous trading, bid‐ask spread and volatility of ADR, cannot explain the positive relation between daily return autocorrelations and institutional ownership of ADR.

Originality/value

Since ADR market is more suitable than other markets for testing the role of private information, stronger and clearer results are got accordingly. This paper suggests that trading strategy based on private information of institutional investors can lead to stock return autocorrelation in ADR daily returns.

Details

Review of Accounting and Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 7 April 2015

Mark Schaub

The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether…

Abstract

Purpose

The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether these were affected by the type of issue (initial public offerings (IPO) vs seasoned equity offerings (SEO)) or the date of issue (1990s vs 2000s).

Design/methodology/approach

Standard ADR and IPO excess return methodology is utilized to compute and test excess returns against a US investment benchmark. This methodology is used in many ADR and IPO studies.

Findings

European SEOs listed in the 2000s did better than those listed in the 1990s. The results for European IPOs were the opposite. Latin American SEOs did better relative to the US market index for issues listed in the 1990s as compared to those listed in the 2000s. Once again the results for Latin American IPOs were the opposite.

Originality/value

This study differs from previous studies by emphasizing differences in short-term return behaviour for Latin American and European ADRs listed during a decade of US market stability (the 1990s) vs those listed in the 2000s when the US stock market encountered times of extreme return volatility. These timing differences affect not only the returns of all the ADRs but also show how ADR IPOs and SEOs tend to have opposite return behaviour based on timing. These return differences are important because the major benefits of portfolio diversification are achieved when asset returns are less correlated with each other.

Details

International Journal of Managerial Finance, vol. 11 no. 2
Type: Research Article
ISSN: 1743-9132

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Open Access
Article
Publication date: 29 April 2019

Júlio Lobão

The literature provides extensive evidence for seasonality in stock market returns, but is almost non-existent concerning the potential seasonality in American depository receipts

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Abstract

Purpose

The literature provides extensive evidence for seasonality in stock market returns, but is almost non-existent concerning the potential seasonality in American depository receipts (ADRs). To fill this gap, this paper aims to examine a number of seasonal effects in the market for ADRs.

Design/methodology/approach

The paper examines four ADRs for the period from April 1999 to March 2017 to look for signs of eight important seasonal anomalies. The authors follow the standard methodology of using dummy variables for the time period of interest to capture excess returns. For comparison, the same analysis on two US stock market indices is conducted.

Findings

The results show the presence of a highly significant pre-holiday effect in all return series, which does not seem to be justified by risk. Moreover, turn-of-the-month effects, monthly effects and day-of-the-week effects were detected in some of the ADRs. The seasonality patterns under analysis tended to be stronger in emerging market-based ADRs.

Research limitations/implications

Overall, the results show that significant seasonal patterns were present in the price dynamics of ADRs. Moreover, the findings lend support to the idea that emerging markets are less efficient than developed stock markets.

Originality/value

This is the most comprehensive study to date for indication of seasonal anomalies in the market for ADRs. The authors use an extensive sample that includes recent significant financial events such as the 2007/2008 financial crisis and consider ADRs with different characteristics, which allows to draw comparisons between the differential price dynamics arising in developed market-based ADRs and in the ADRs whose underlying securities are traded in emerging markets.

Details

Journal of Economics, Finance and Administrative Science, vol. 24 no. 48
Type: Research Article
ISSN: 2077-1886

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Article
Publication date: 1 September 2007

Akash Dania and Rahul Verma

Terrorism, an important component of Political risk as a possible determinant of ADRs (American Depository Receipts) returns have received little attention in academic literature…

Abstract

Terrorism, an important component of Political risk as a possible determinant of ADRs (American Depository Receipts) returns have received little attention in academic literature. To address this issue and examine whether political risk is a major determinant of ADR returns of emerging market countries, this paper empirically examines market valuation of Indian ADRs around acts of terrorism. Using a sample of 52 such events in the sample period Jan 2003‐Dec 2003 we empirically analyze returns of Indian ADRs. The results from our study indicate a marginally negative significant effect, failing to indicate that event of terrorist attacks severely affect the Indian ADRs listed on the US stock market. This may be explained by a combined effect of; (a) the optimism of US investors towards emerging markets, and (b) market participants becoming more resilient and making informed choices around the “general” events of terrorism.

Details

Journal of Asia Business Studies, vol. 2 no. 1
Type: Research Article
ISSN: 1558-7894

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Article
Publication date: 1 August 2003

Louis Braiotta

This study examines whether the presence of audit committees for US commercial bank registrants (SEC Form 10‐K filers) significantly affects the likelihood of adoption by certain…

Abstract

This study examines whether the presence of audit committees for US commercial bank registrants (SEC Form 10‐K filers) significantly affects the likelihood of adoption by certain non‐US commercial bank registrants (SEC Form 20‐F filers). Results of a logistic regression analysis of 31 US commercial bank registrants with audit committees and 31 non‐US commercial bank registrants without audit committees suggest that demand for oversight protection in the sample non‐US commercial banks is more likely to increase as the total market capitalization (size) increases. Additionally, this paper investigates whether the presence of audit committees for non‐US commercial bank registrants (Form 20‐F filers) increases their transparency with a concomitant effect on infusion of foreign equity investment. Results of a logistic regression analysis suggest that the presence of audit committees does not significantly affect the likelihood of an increase in the banks’ American depository receipts.

Details

Managerial Auditing Journal, vol. 18 no. 6/7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 11 March 2022

Fanglin Shen, Quantong Guo, Hongyan Liang and Zilong Liu

The purpose of this paper is to investigate the relationship between investors' divergence of opinions and the asset prices of foreign stocks and also examine the effect of home…

Abstract

Purpose

The purpose of this paper is to investigate the relationship between investors' divergence of opinions and the asset prices of foreign stocks and also examine the effect of home market country-level factors on the influence of divergency of opinions on stock price.

Design/methodology/approach

The authors employ panel data estimation with fixed effects to examine the host market response in divergent opinions to the earnings announcements. The paper uses the American Depositary Receipts (ADRs) of 42 countries from 1985 to 2011.

Findings

The authors find a negative relationship between differences of opinions and excess quarterly earnings announcement returns, and investors do process information asymmetrically based on good and bad earnings shocks. In addition, the authors find the negative relationship between divergent opinions and excess earnings announcement returns in ADRs is more pronounced in countries with short-sales restrictions, while other home-market country-level factors – the enforcement of insider trading law, legal origin, investor protection and rating on accounting standard – do not influence the relationship between investors' divergency of opinion and stock returns.

Originality/value

This paper is among the first to bring asymmetric effects on convergence in Miller framework and enhance the understanding of price convergence documented in Miller (1977). In addition, this study incorporates home-market country-level factors in explaining the relationship between investors' divergency of opinions and stock returns.

Details

International Journal of Managerial Finance, vol. 19 no. 2
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 December 2003

Mark Schaub

The finance literature extensively documents the abnormal positive returns of unseasoned initial public offerings (IPOs) in the early trading. Neuberger and LaChapelle (1983)…

471

Abstract

The finance literature extensively documents the abnormal positive returns of unseasoned initial public offerings (IPOs) in the early trading. Neuberger and LaChapelle (1983), McDonald and Fisher (1972), Neuberger and Hammond (1974), Reilly (1977), Logue (1973), Ibbotson (1975), Ibbotson and Jaffe (1975), Ritter (1984), Miller and Reilly (1987), and Ibbotson, Sindelar and Ritter (1988) are but a few studies providing convincing evidence of initial price volatility in IPOs which, after some period of time, tends to level off. Some IPO studies, particularly Neuberger and LaChapelle (1983), Logue (1973), and Friend (1967), intentionally ignore institutional IPOs. Logue (1973) states that banking issues create a downward pricing bias because the market has already accurately priced the assets of financial institutions. Alli, Yau and Yung (1994) provided evidence that banking IPOs enjoyed significantly less positive abnormal returns in the early trading than a control sample of industrial firms. This study examines the early stock price movements of the 32 non‐US banking equities issued on the New York Stock Exchange (NYSE) from January 1986 through May 2001 and finds that virtually no underpricing exists in the early trading for those issues – a vast deviation from the results of most IPO and ADR event studies, but a strong indication that banking IPOs do create a downward pricing bias when considered in IPO studies with securities from different industries. All new foreign equity issues in this study are traded as American Depository Receipts (ADRs) except the Canadian stocks.

Details

Managerial Finance, vol. 29 no. 11
Type: Research Article
ISSN: 0307-4358

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